The Hidden Cost of Making a Late Payment on Your Mortgage

Something came up and money is a little tight this month. Maybe you’re in danger of missing your mortgage payment.

Life throws everyone curveballs every once in a while. The key is not to panic when you get one. If you know you’re going to be late or have trouble making a mortgage payment, give your loan servicer a call. They may be able to help you work out alternative arrangements.

You want to avoid making a late payment because it can have a far-reaching impact beyond your mortgage. Before we get into the real cost, let’s give you some good news.

Grace Period

If you have a traditional mortgage, your payment is generally due on the first of the month. However, there’s a pretty standard practice within the industry that you have until the last chance day on the 16th (or the first business day thereafter) to make your payment without incurring a penalty. This is referred to as the grace period.

Although the 16th is pretty common, you should check with your lender or servicer to see how long your grace period actually is. It may be stated in your loan documentation as well.

Hitting You in the Pocketbook

If you can’t make your payment by the end of your grace period, it’s officially considered late. In the short term, this means you’ll pay a late fee.

The amount of the fee depends on what type of loan you have. In some cases, the amount charged for late payments is also limited by state law.

On most types of loans, the late charge is only applied to principal and interest. Let’s say you have a $1,000 monthly mortgage payment based on principal and interest. If the late charge is 5%, you’re out $50 additional dollars.

Credit Impact

The penalties for not paying your mortgage get worse as the month goes on, according to Quicken Loans Chief Economist Bob Walters.

“If clients don’t pay by the 16th, they incur a financial penalty,” Walters said, “but their credit isn’t yet affected. If they don’t pay by the end of the month, they will be reported to the credit bureaus and this is when a person’s credit becomes damaged.”

The effect of a single late payment on your credit report varies. If you have a particularly high credit score and suddenly miss a payment, you can see a steeper drop than someone with a score of 640 and a few late payments, according to Equifax. Although each credit bureau has its own formula for calculating the scores, the drop may be as much as 90–110 points for an initial missed payment.

Here’s some good news: FICO says one late payment is not a score killer. Your score takes into account late payments only as part of your overall payment history. If you have paid your bills in the past and continue to pay all your bills going forward, you should be able to make up the drop eventually. However, you should know that any late payment will stay on your credit history for seven years.

The credit hit gets worse the more you push the payment back. A payment that’s 90 days late is worse than one that’s 60 days late, which is worse than one that’s 30 days late, and so on. The biggest detriments to your credit are collection items such as bankruptcies, foreclosures and liens.

Although we’ve talked about your mortgage payment up to this point, it’s important to note that the effects are similar if you have something like a home equity line of credit.

Although your payment history is far from the only factor affecting your credit, it’s given the most weight – 35% of your overall score.

Side Effects

So what happens when your credit score drops? The short answer is that it impairs your access to credit. However, it might be more meaningful to take a look at the practical impact.

When you have bad credit, it’s harder to get a mortgage. Even if you get one, you may still have to pay a higher rate. The same is true for car loans.

You may also have trouble opening up new credit cards as well. This includes the cards you can get from retail stores.

There are also effects outside access to credit and money. Employers will sometimes run your credit when you apply for jobs. It can affect your insurance premiums as well.

If a life change causes you to temporarily have trouble making your mortgage payment, the most important thing to remember is to contact your lender or servicer. You might be able to work out a payment plan so that you won’t continue to fall behind and to find a solution that works with your budget. Even if you are on a payment plan but don’t make the contractual payment within the month due, it will impact your credit.

Be sure to contact your servicer with any questions you have regarding your specific situation.

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The only way your credit can possibly impact your children ordinarily is if you let them become an authorized user on credit cards in order to build up their credit score. It might also have an impact if you choose to cosign student loans for them, In that case, if your credit started to drop, they could see an impact. I hope these financial difficulties are temporary, but you could always contact your loan servicer and see what they could do to help make the payment more manageable. That would be my advice.

I didn’t pay my mortgage for 5 years, they didn’t foreclose I found out there is a massive lein on my property from an error in clearing the title from the previous servicer, that old servicer is out of business and there is no legal way to clear the lein. My home is now destined to rot.. its been boarded up and secured from lack of payment but no one will foreclose on the property bc of the lien and now my credit has been run into the ground and I’ll never own the home I paid for over the last 15 years, Title cannot be cleared, any advice?

It seems odd that the title can’t be cleared. The title work shouldn’t have anything to do with the servicer I don’t think. They just collect monthly payments. I would suggest reaching out to a local real estate attorney’s office to research your situation as it’s really unique. You can also contact a title company or real estate agent to point you in the right direction to assure the information is cleared. Also, since the servicer isn’t in business, please consider reaching out to your loan investor (For Ex. FHA/VA) to assist you with this. Thanks for reaching out!

We have had to be late with our mortgage payments 3 times this year. The first delinquent payment was paid on the 17th of the month followed by a payment made on the 22, and the last on the 19th. We have called into our QL lender and informed them of each late payment and when we would pay it. We have paid late charges. I am concerned that because of these payments they might decide to foreclose on our property. Could this be the case?

My husband and I have unfortunately run into some financial problems regarding the amount of income we are now receiving since purchasing our home. It is a temporary issue but it has caused us to have to make payments after the 16th for the past few months. We have been making the payments before the 30th but are unable to afford the late fees at this time. What happens for unpaid late fees? Is this something that that will get you turned over to collections or possibly have your home foreclosed?

No, it just gets tacked on to the overall balance you owe at the end. At least that is how mine works. I would still try to pay the late fees when you can to catch up so you can keep track of where you are on your loan schedule.

My late fees are non interest bearing, meaning I can let them pile up only speculation is they need to be handled before you sell the home. Furthermore savvy credit checkers can view your loan balance and using basic math can see if you’re paying late fees. When in doubt read your origination documents, any fees/charges/interest will be outlined there, otherwise I agree with the original poster contact your servicer in some cases depending on the servicer you can make arrangements to waive partial fees on account as most servicers make their money on the fees and the interest profit goes back to the bank.

You’re saying that late payments made by the end of the month in which they are due will have an impact on your credit rating (which is the case for Candice’s query)? My understanding is that there is no impact on your credit rating (outside of the particular loan servicer) until you are reported as 30 days late. I understand that most servicers even report to the credit bureaus any such payments, made after the grace period, but prior to the 1st of the following month, to be on time

We took Candice’s query to be specifically about late fees. Late payments aren’t reported on your credit until they are 30 days late. There might be a late fee, but no impact on your credit before then. Thanks!

I have a question, I am currently selling my house and looking for a another one I went to a loan officer to check if i qualify and the credit report came back with 30 day late payment on my mortgage payment went through on july 1st long story short he recommended that I pay off my credit to raise my credit score I might still have a chance to qualify with the missed payment within the year. is it possible to have high credit score and 1 missed payment and still qualify?

One missed payment wouldn’t be a problem. If you’re looking to shop around, we would love to win your business. You can check out your options through Rocket Mortgage or call 888-728-4702 to be connected with one of our Home Loan Experts.

Depending on your situation and your goal, you may have some options, but you really need to talk to someone. You can speak with one of our home loan experts by filling out this form or calling 888-728-4702.

I am first time and I have been in my home going two years. I was hoping by now I would be paying my mortgage more regularly; however, that is not the case. I have been behind more than once this year. It mostly my fault and choices I make. I have double down to make back to back payments to get caught up and it has work. Consequently, I find myself in a vicious cycle. For example in the month of Oct I made two payments to bring my mortgage current. Then in November I was set to pay the mortgage for that month when I had to cancel payment to pay the light bill. Now my original plan was to pay my mortgage in November, then pay two mortgages in December. The first mortgage would be for December and the second mortgage would be for January. I get paid three times in the month of December. I would not pay the next mortgage until February. Well that plan is gone because now in the month of December I have pay November and December mortgages in the same month. These are my questions: First impact this having on my mortgage and credit? Can they move to foreclose even though I am paying getting caught up ? Second: How do I break this cycle? I make enough and my bills are not high, the real issue is my checking account is always negative so I am bleeding money. The final question is what is your advice in a situation like this?

The impact this has on your mortgage is that number one you’re constantly going to be paying late fees, so that bill is going to be even higher. They could move to foreclose at anytime depending on what your agreement with the lender says. Typically, they don’t want to do that right away because it’s expensive to foreclose and they would like to see you catch up. In terms of your credit, that takes it bigger and bigger hit with every month you are late.

In terms of breaking the cycle, if you make enough money, you just have to figure out where you can cut back and prioritize your bills above everything else. That’s the best advice I can give you.

I haven’t made my November mortgage payment due to unforseen circumstances. I will make it December 8th. which is obviously outside the 30 day window. I will be able to make December’S payment on the 16th which is within the grace period. I have spoke to my mortgage company so they are aware. We have not had a late mortgage payment before. What will happen? Especially considering we have a contract that we have to buy the land behind us by the end of 2017.

My husband tried to do a kind thing for his dad and took a mortgage for him out in his name. His father was making payments on the loan. Approximately 9 mos ago, he was 30+ days late and we only found out because of a credit monitoring account we had. My husband took a 70 pt hit. We made the payments to bring the mortgage back up to date, and there were no more late payments after and the house is now sold. We are looking to buy in another 6-8 mos from now and are wondering if this will destroy our chances at financing? This would put the last late mortgage payment around 15-18 mos back. We will have around 10% to put down on a ballpark purchase of 200 to 250,000 and his credit is now back up near 740 with no other late payments and little debt. Thoughts?

After the late payment by your father in law, it sounds like you and your husband have done everything right. Based on everything you’re telling me, there’s no reason to think the late payment would hurt your chances of approval. Of course, there are many factors that go into mortgage approval, but it sounds like you are in decent shape.

Assuming your payment is due on the first of the month, if it’s made by the 16th, it’s still in the grace period. After that, you could be charged a late fee. It doesn’t start affecting your credit until you’re 30 days late.

It’s been a rough month and my payment is due on the 16th. I am unable to make my payment until the 22nd.
I understand that I’ll be charged the $72.00 late fee but will this affect my credit score in any way, affect my ability to apply for anything in the future or be posted anywhere I’m very concerned please help.

I’m sorry to hear you’ve had a rough month. I’m here to deliver a piece of good news. The late payment doesn’t show up on your credit report until you’ve reached 30 days late. If you pay by the 22nd, it should be okay.

I just found out that my business partner did not pay our HELOC for the rental property that we own and it was 34 days late. I immediately made the payment, however I would like to know if paying a HELOC a few days late will hit my excellent credit score as hard as a 30-day delinquent mortgage payment? Thanks!

That’s something I’m having trouble finding the answer to and we don’t do loans involving home-equity lines of credit. However, I can tell you that even if you miss a regular mortgage payment, it will only affect your score for so long despite the amount of time it stays on your record. The longer it’s been since the late payment the better. Your HELOC missed payment will work the same way.

I’m sorry I couldn’t give you an answer, but you have given me a future topic to dig into.

I’m about to try and purchase a home and found out I have a handful of 30 day lates on my credit report from a mortgage on a rental property that I sold in Dec of 2015. The lates were apparently a rolling 30 day late where some event happened and 5-6 months in a row the payment posted late. I was never even charged a late fee and didn’t know anything had ever happened until I had my credit run by my mortgage broker. I had the house for almost 10 years and this came as a huge suprise to me and Ocwen Servicing won’t remove it. I’ve also filed a request with the credit reporting agencies but it seems like an uphill battle.

Interestingly, my credit is still around 740 and I have no debt and a strong W-2.

My question is how will this affect my ability to get a new mortgage, even though my credit score is 740?

It’s really weird that you were never charged a late fee. Usually, that’s how you would find out. You can’t miss those. I’ve also never really heard of a rolling late. It makes me wonder if these really were late. It sounds like you’re doing the right thing disputing it, although that’s 50-50 and can take a while.

As far as affecting your ability to get a mortgage, it depends on how recent they were. My suggestion is that you talk to one of our mortgage bankers who can help get into your situation in more detail. You can do this by filling out this form or calling 888-728-4702.

If I pay my mortgage within the grace period, that is before the 16th but after the 1st, will that affect my credit? I will not have late payments for sure but just concern that my credit rating will be affected.

This past month I made my Jul pymt on Aug 1, I know its technically past 30 days, but will i for sure receive a negavtive credit reporting for july??? Is ther a way to know for sure??? is there some universal cut off day when 30 day credit is reported past due???????

This question is in reference to a VA Loan. If you have retired from the military and there is a pay gap before your next secured job (in this instance, 2 months) and you have a letter with your salary, start date, and first pay date, will the lender be willing to waive your late fee?

I wired my payment on Friday, July 29th and it doesn’t show posted on the website. Will I be 30 days late? I have the wire tracking number showing it was sent on the 29th. I really hope not. I’m so stressed.

I can’t tell you for sure. That would depend on the stated policies associated with the wire transfer. Sometimes a bank or other financial institution will credit your account that day but it won’t show on the statement for a couple days. I imagine there are written policies in place saying that if you make the transfer before a certain time, it’s credited that day. I hope this helps.

So it’s the 15th, and I almost forgot to pay my mortgage & it’s 8pm pacific. My quicken app says late fee 7/16. I tried to pay thru the app, but it only lets me use tomorrow’s date, the 16th. Will I incur a fee? Or am I in the clear?

I’m in a situation where my next payment will be late…8 days past the end of the grace period (23rd of the month). I understand the late fee, but can my mortgage interest rate be raised as a result of paying late? I’ve never been late before and have good credit. Just a rough month.

I can tell you that you’ll have a late fee, but your mortgage interest rate won’t go up as a result of a late payment. Since you’re not 30 days late, this also won’t have an impact on your credit. Hope this helps! Good luck with everything that’s happening.

You’re right that this is an important distinction and that the payments are technically missed. However, when creditors look at your account and it’s reported on your credit report, these things are often defined in terms of number of days late: 30, 60, 90, etc.